The Real Deal New York

Delshah battles bankruptcies in Harlem and West Side

May 16, 2011 10:47AM
By Adam Pincus

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From left: 321 Lenox Avenue (credit: PropertyShark) and H&H Bagels at 639 West 46th Street

Midtown-based Delshah Capital was poised to win at auction a pre-war, 33-unit Harlem apartment building saddled with $14 million of debt, but was blocked last Thursday when the owner filed for bankruptcy.

Meanwhile, last month, Delshah, led by principal and CEO Michael Shah, was expecting to take control of the two-story H&H Bagels building at 639 West 46th Street, until the Toro family company that owns the property filed for Chapter 11 bankruptcy, blocking a sale.

Such roadblocks are common for buyers of distressed debt, now wrangling with owners over who will take over the properties.

In the most recent instance, Staten Island-based real estate investor Lorenzo De Luca, through his Lenox 126 Realty, filed for Chapter 11 protection to block a foreclosure sale at the apartment building at 321 Lenox Avenue, located one block from the popular Harlem Center mall at 125 West 125th Street.

In 2006, De Luca paid $9.1 million for the building, at Lenox Avenue and 126th Street, which has 20,246 square feet of residential space and 3,500 square feet of retail space, data from PropertyShark.com shows. Now all of its residential tenants are free-market.

At the time of the acquisition, Chinatrust Bank lent the buyer $7.5 million, but that loan was declared in default in 2007. In July 2008, the lender filed to foreclose.

In December 2010, Delshah bought the first mortgage, with a face value of $7.5 million from Chinatrust, and took over the foreclosure process. In March, State Supreme Court Justice Jane Solomon ordered the property to be sold at auction.

But that was blocked by last Thursday’s bankruptcy filing. De Luca claims in the filing that the property has assets of $10.4 million and liabilities of $14.7 million.

De Luca also developed the Lower East Side condominium 133 Essex Street.

In addition to investing in real estate, De Luca is an attorney and also a director at Protein Genomics, according to the company website, among other related skin-care companies. He did respond to requests for comment. Delshah declined
to comment.

Commercial broker Shimon Shkury, president of Ariel Property Advisors, said while during the boom years people expected the Harlem building would be a condo, he said today it could remain a rental for several years.

“It would be wise to keep this as a high-producing rental and refinance,” he said. He is not involved with the bankruptcy proceedings.

Delshah is also pursuing ownership of the 25,100-square-foot H&H Bagel bakery and retail store site near 11th Avenue. Delshah acquired the debt that has a $4 million face value in May 2010 from the First American International Bank.

Delshah stepped into the foreclosure process initiated by the bank, but that was halted with the April 13 filing in U.S. Bankruptcy Court in Manhattan, signed by H&H Bagels owner Helmer Toro.

H&H Bagels remains open at the location, an employee there said. A company spokesperson declined to comment.

In a high-profile case late last year, Delshah filed to block the sale of 40 Broad Street, claiming it did not approve the sale of the property, known as the Setai.

Court records show Delshah’s litigation at the property was discontinued in March, while a source said Delshah, which paid $4.2 million for an ownership in the property, retains an equity interest.

In early April, Ziel Feldman’s HFZ Capital and the Israel-based Acro Group finalized an $80 million deal to take over the note at the building.

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